JPMorgan In Hot Seat Over London Whale Losses

JPMorgan Chase executives testify before a Senate committee today. They'll be questioned about the multibillion-dollar trading losses racked up by a London-based unit of the bank. The bank acknowledged last spring that it lost more than $6 billion. The executive who was running the unit told a Senate subcommittee that employees at the bank misled her about the extent of the risks they were taking while trading derivatives. Ina Drew this morning testified about the multi-billion losses the bank incurred in what came to be known as the London Whale incident. The Senate Permanent Subcommittee on Investigations says traders concealed the extent of the losses until it was too late to do anything about them. NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: The subcommittee spent months poring over almost 90,000 documents, transcribing telephone calls and interviewing bank employees about what's been called the London Whale trading losses. Michigan Senator Carl Levin, who chairs the subcommittee, said the report underscores the dangers incurred when big banks engage in risky derivatives trading.

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SENATOR CARL LEVIN: When Wall Street plays with fire, American families get burned. The task of federal regulators and of this Congress is to take away the matches. The Whale trades demonstrated that this task is far from complete.

ZARROLI: The losses occurred at the bank's chief investment office, which was formed in 2006 to invest excess deposits. For years, it made money trading derivatives, and its portfolio of assets mushroomed. But by early 2012, it was losing money. The subcommittee's report says at that point, the unit doubled-down on its risky strategy. It also changed the models it used to value assets, essentially keeping two sets of books in an effort to conceal the mounting losses. When risk models at the bank began to warn of trouble, traders dismissed them as garbage.

Ina Drew, the former head of the unit responsible for the trades, told the subcommittee today that she learned well after the fact that traders working for her had mislead her about what was going on.

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INA DREW: Clearly, mistakes were made. The fact that these mistakes happened on my watch have been a most disappointing and painful part of my professional career.

ZARROLI: The report says that when media accounts about the losses began to come out, bank officials falsely stated that the trades had been vetted by regulators. They also said the unit's trades were conducted for hedging purposes, and not - as the Senate subcommittee contends - part of an investment strategy. The report says the unit also failed to tell federal regulators what was happening, but it says regulators were at fault, too. It says as the losses grew, the comptroller of the currency didn't ask too many hard questions about the unit's portfolio. Jim Zarroli, NPR News. Transcript provided by NPR, Copyright NPR.